IndoAgri

IndoAgri: Goldman Sachs has key takeaways from site visit. House maintains Buy Calll. Note that Sugar contribution in full swing in 3Q12, and IFAR has harvested approximately 10,000 ha of sugarcane ytd, from its planted area of 12,323 ha at its Komering estate. Mgt expects Komering’s sugar production to reach over 50,000 MT in FY12 (as of 1H12, 16,000MT), and 3Q selling prices to average Rp9,000/kg. Longer term, IFAR guided for a 2-3 yr target of 18k ha planted area, 80 ton/ha cane yield (from R&D activities) and sugar production of 140,000MT. Indo refining capacity ramp up only by end 2013 – Of IFAR’s 1.42mtons palm refining capacity, Tanjung Priok (TP) houses 420k tons capacity, and specializes in cooking oil, margarine, and shortening. TP has sufficient land for an additional 210kt refinery capacity (9 months to build), but there are no plans to commence construction. Mgt estimates that refining capacity in Indo approximates 16m-17m tons today, and will reach 22m-23m tons only by the end of 2013 due to construction bottlenecks. As per the co, while cooking oil consumption has been growing at 3%-4% p.a, branded cooking oil grew at 6%-8% p.a. Currently, 25% of Indonesia’s cooking oil consumed is branded cooking oil, of which IFAR commands a leading market share within the branded market. Furthermore, there may be upside risks to branded cooking oil market share from bulk should the Indonesian government ban “scoop” cooking oil by 2015 for health reasons.